The European Parliament voted today – by a thumping 487 to 152 – for a Europe-wide Financial Transactions Tax (FTT) to be implemented by 2014, as part of a wider growth strategy. They couldn’t have sent a clearer message to the EU leaders who are meeting this evening in Brussels to discuss the Eurozone crisis, growth and possible solutions like an FTT. The Robin Hood Tax (as the FTT is called in some EU countries like Britain) has been placed on the EU Summit agenda by the new French President Francois Hollande. Having raised it this weekend at the G8 summit in the USA, Hollande has made it clear he is at least as committed as his predecessor, and it is a proposal backed by four of the five biggest economies in the EU – Germany, Italy and Spain as well as France.

David Cameron is a lone voice among the big five in opposing the tax. He told Hollande in Washington that an FTT would do nothing to stimulate growth which is staggering for a Prime Minister who has presided over the VAT increase , the pasty tax, the caravan tax… Apparently taxes on ordinary people are fine, but taxes on Cameron’s friends and funders in the City of London are unacceptable!

But in any case, he is wrong. The European Commission’s latest impact assessment suggests that, while the tax itself could reduce growth by 0.004% a year, if the revenues raised were re-invested in the economy, European growth would be raised by 0.2% to 0.4% – which may not be huge but it would bring the UK out of the recession that David Cameron’s government have plunged us back into. Independent estimates of the impact both of the revenue and the changes in market behaviour (a Robin Hood Tax would reduce the incentive to gaamble and speculate, and therefore encourage more long-term investment in infrastructure and manufacturing) suggest an FTT would produce even more growth than that.

The European Parliament was voting on a report from its Economic and Monetary Affairs Committee about the European Commission’s draft directive on FTT, although it is only advisory as the Parliament does not have control over tax policy. The report recognised that countries like the UK might not join in with the first wave of implementing the tax, and urged a smaller group of EU countries to get on with implementation regardless. It also proposed exempting pension fund investments, and extending measures to tackle tax evasion and tax avoidance.

Written by Owen Tudor

I’ve been the Head of the TUC’s European Union and International Relations Department since 2003 and have worked at the TUC since 1984. I’ve been a member of the Health and Safety Commission, the Civil Justice Council, the Social Security Advis…

Charles, taxing the 1% is what a Robin Hood Tax is all about. Despite what opponents of the tax say, it would actually be far easier for banks to pass a bank tax on to consumers than a Robin Hood Tax, whose main payers would be high net worth individuals. And it would be a bad idea to tax the retail and co-operative banks who are actually already putting their resources into the real economy.

Another very well written FTT article by Owen Tudor. What are Cameron & Osbourne so ‘frightened’ of? Is it the city lobby groups, the tory party donors, the tax evaders & avoiders ………………… or is it the truth, which even now they refuse to accept? To part quote one of the comment writers in The Guardian, ”the clock is now ticking, tic toc, tic toc ……..’’

So let me get this straight – the FTT reduces EU GDP growth UNLESS you ‘re-invest it’ last time a government actually did that for a specific tax was…?

Is the proposal still to pay some of the tax direct to Brussels, thus giving it tax raising powers?

An EU FTT would ensure that the vast majority of trades would go to somewhere that didn’t have one e.g. the USA, Singapore etc. London would see c200,000 redundancies at least (but ‘bankers’ so the TUC doesn’t care as is has said noting about the 200,000 since 2008)

An FTT doesn’t tax the 1% – they avoid it as you keep saying. Investment funds will bear the brunt and pass it on to their (pension fund)customers and so on. Tax incidence anyone?

Wow! So you think an EU FTT would cause two-thirds of all finance sector jobs in London to move continents? This is presumably based on the same detailed research that said the minimum wage would cost 2 million jobs! LOL, as the Prime Minister wouldn’t say.

Economic forecasting is often barkingly unrealistic. That’s why the EU’s initial forecast (based on modelling which assumes *all* tax reduces growth) didn’t include estimates of the growth effect of actually spending the revenue! But forecasts which do suggest an EU FTT would produce growth.

The economic models that say an FTT would reduce growth are models that say ALL taxes reduce growth. Yet they are relied on by people who raised VAT, while refusing to accept that they would hurt growth.

Taxes reduce growth because they take money out of the economy. Put it back in (the other options being to burn it or shove it under the Chancellor’s mattress), and the impact on growth depends on the relative impact of what was being done by the original owners of the money and the Government. I think Governments would use that money more productively than the high net worth traders who would pay the tax currently do.

Secondly, you suggest I have ‘faith’ that democratically-elected politicians will spend the revenues of an FTT more productively than the bond traders, hedge funds and high frequency trading outfits. On the contrary, my argument is that we could persuade them too. Your argument is based on the contradictory position that we CAN persuade them to introduce the tax (and trust me, it’s not without effort) but we CAN’T persuade them how to spend it. Yet you adduce no evidence to support this contradictory viewpoint.

And thirdly (trust me, there’s more, but my fingers tire), although I think politicians need persuading to do the right thing, on balance, I think democratically elected politicians are more likely to do good and sensible things than any other group of rulers we have ever experienced. The real fantasists are the extreme liberals who think there is some as yet untried system of government that would be better.